Judge Tosses Scrushy Obstruction Charge

BIRMINGHAM, Ala. – A judge threw out an obstruction of justice charge against Richard Scrushy (search) in a hearing Thursday, a day after his defense rested without calling the fired HealthSouth Corp. (search) chief to testify in his corporate fraud trial.

After repeatedly peppering government attorneys with harsh questions, U.S. District Judge Karon Bowdre said jurors shouldn't be allowed to consider the obstruction count when deliberations begin on numerous other charges next week.

Bowdre said prosecutors had no evidence that Scrushy committed obstruction except their own "spin" on secretly recorded talks in which the government claimed Scrushy tried to get aides to lie in sworn testimony before the Securities and Exchange Commission (search).

"The government's proof is inadequate," said Bowdre, saying she would have to throw out the verdict even if jurors convicted Scrushy of the crime.

Bowdre also indicated she was leaning toward dismissing another charge — one that accuses Scrushy of trying to get an aide to sign a false financial certification under the Sarbanes-Oxley (search) law, passed in 2002 amid a wave of corporate frauds. And she still must consider whether to dismiss some of the money laundering counts against Scrushy.

Free on $10 million bond, Scrushy is the first chief executive tried under Sarbanes-Oxley, which set strict rules for corporate reporting after a series of accounting scandals. Originally charged with three violations under the act, Bowdre previously dismissed another of the counts.

Bowdre previously granted defense motions to throw out eight charges from the 58-count indictment against Scrushy. He still is charged with conspiracy and multiple fraud counts.

Testimony in the trial ended Wednesday in its 16th week after the defense finished its case without calling Scrushy to the stand.

During the hearing Thursday on defense motions to dismiss some of the charges, Bowdre repeatedly questioned key parts of the prosecutors' case against Scrushy.

Some of Bowdre's toughest questions focused on the obstruction charge, which accuses Scrushy of trying to sway the testimony of former finance chief Bill Owens during a conversation secretly recorded by Owens for the FBI.

Prosecutors claim the recording shows Scrushy tried to influence subordinates' testimony to the Securities and Exchange Commission in 2003. At one point, Scrushy told Owens: "This conversation did not take place."

But Bowdre challenged the government's interpretation of the discussion as she agreed with defense claims that the conversation didn't have anything to do with a massive fraud at HealthSouth so it wasn't illegal.

Referring to a statement in which Scrushy referred to getting back to "accurate numbers," Bowdre asked prosecutor Tamara Matthews in a skeptical tone: "What's illegal about that?"

The prosecutor said the recording also showed Scrushy was excited that investigators were looking at matters unrelated to a massive accounting fraud at HealthSouth.

"Is there anything wrong with being excited that the SEC investigation is going in one direction and not another?" Bowdre asked.